Standard & Poor affirm Turkey’s notch, outlook stable

ISTANBUL

Standard & Poor’s Ratings affirms Turkey’s credit ratings at “BB+/B”. DAILY NEWS photo, Emrah GÜREL

Standard & Poor’s Ratings Services affirmed on Nov. 22 its unsolicited long- and short-term foreign currency sovereign credit ratings on Turkey at “BB+/B”. It also determined its outlook as stable, as strong growth prospects balanced risks from persistent current account deficits and expensive external financing.

“Turkey’s dependence on external financing remains significant, but we note that monetary policy flexibility and meaningful scope for fiscal expansion provide important buffers,” S&P said.

The agency warned that they could lower the ratings if credit growth accelerated further, relative to GDP; if current account deficits widened substantially; or if external leverage of the Turkish economy increased materially. “We could also consider a downgrade if external borrowing was to become significantly more costly,” it added.

The rating agency forecasted annual growth of about 3 percent for 2013, accelerating to 3.6 percent in 2014. However, the Turkish government revised its 2013 growth target downwardly from 4 percent to 3.6 percent.

“The lira remains weaker than it was at the beginning of 2013. Depreciation passes through to the inflation rate via both higher inflation expectations and higher import prices,” Standard&Poor said. They projected inflation to reach 8 percent by the end of 2013, noting that it could ease again when the lira stabilized.

The Turkish Central Bank forecasted inflation to reach 6.8 percent by the end of 2013.